Leaders of different export oriented industries like BGMEA, BKMEA and many others have slammed the large scale gas price hike on Sunday — the day the new budget came into effect without any hints od such step in the budget.
“The hike will increase production cost manifold and decrease their competitiveness in the global market,” they said. The price hike will raise price of gas for captive power generators to Tk 13.85 per cubic metre from Tk 9.62 now and for industries it will be Tk 10.70 per cubic metre from Tk 7.76.
Terming the 44 per cent tariff hike for captive power generation ‘non-realistic’ Mohammad Ali Khokon, President of the Bangladesh Textile Mills Association (BTMA), said the high tariff will severely affect local textile millers and especially the captive power producers.
As a result, a good number of textile industries will also face uneven competition at a time when local millers are facing pressure for ensuring compliance and prices of locally produced yarn and fabrics are falling, the BTMA chief said.
He also feared that many of the millers will fail to pay back bank loans to become bankrupts, resulting in closure of more units. Electricity production cost through captive power will increase by Tk 15 to 18 for a kg of yarn production, which is now Tk 9.62.
Some 430 textile mills out of the 1,500 BTMA members, including spinning, dyeing and weaving units, are generating captive power and producing more than 1,300 MW of electricity to run their mills. They have invested some Tk 200 billion for this purpose and more gas price will hit them severely.
Dr. Rubana Huq, President of BGMEA said gas bill eats up around 1.5 per cent of their manufacturing cost. So 38 per cent increase in gas price means almost 1.0 per cent increase in their production cost. It will be another blow to an industry struggling for every penny, she further said.
She said factories are suffering from pressure fluctuations. “We are already in tipping point regarding pricing, and entrepreneurs are not feeling encouraged to invest due to numerous challenges.” She said adding this sudden increase will further cripple their financial plan.
Higher production cost will make doing business further difficult for small and medium enterprises now operating on a thin ice,” she said.
Abdul Kader Khan, President of the Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), said local backward linkage industry now producing around 90 per cent requirements locally will lose their competitiveness.
“RMG sector, the major buyer of locally made accessories, is constantly facing price pressure and following the rise in production cost, they will not be able to offer increased rate which is most critical for the industries survival.
Abdul Barik Khan, Secretary of the Bangladesh Jute Mills Association (BJMA), said the gas price hike will affect their sector, especially the units that produce diversified jute goods. Entrepreneurs will be discouraged to go for product diversification, as the cost of production in dyeing segment will increase, he said.
The industry leaders have urged the government to review the tariff downward to help them retain their competitiveness and stay in business in the long run. They said civil society members and consumer groups had also opposed the gas price hike in public hearing but BERC seems to have implement the government desire ignoring opinion raised in the public hearing.